Hey there,
Aecon Group is struggling right now. While backlog is growing and it is landing more contracts now that pandemic-delayed contracts are starting to be awarded, there is one headwind in particular that is causing the company some headaches.
Pre-pandemic contracts which have been delayed in large part due to the pandemic, labour shortages and subsequent supply chain issues are now also dealing with inflation. When you combine all these factors, it is leading to increasing costs and to disputes related to who is responsible for those costs.
The biggest being the Coastal Gas Link - which they are still in litigation with. There are 3 other projects (4 in total) that are facing similar cost pressures and while Aecon (+ its JV partners) are of the view that it is the owners responsibility to cover costs overruns, the owners think differently. It is why the CGL issue is not in the hands of the courts. So this has lead to short-term headwinds and is having a material impact on the company. Since it is leading to some strain on profitability and cash flows, the dividend is also going to be questioned the longer these issues persist.
We want to see some resolution to some of these issues, especially CGL as the longer they drag, the more negative impact they'll have. Long-term however, Aecon is still one of the best in the industry and we can see it is having success in winning contracts with its backlog rising to $6.6B.
Mat
(I am still long ARE but holding, not adding till I see some resolution to the above).